Standing Committee E

[Sir John Butterfill in the Chair]

Commissioners for Revenue and Customs Bill

Dawn Primarolo: I beg to move,
 That— 
 (1) the Committee recommends that the programme order of the House [8th December 2004] should be amended by substituting ''18th January'' for ''13th January''; 
 (2) during proceedings on the Commissioners for Revenue and Customs Bill, in addition to its first meeting on Tuesday 11th January at 9.25 a.m., the Standing Committee shall meet on Tuesday 11th January at 2.30 p.m., on Thursday 13th January at 9.25 a.m. and on Tuesday 18th January at 9.25 a.m.; 
 (3) the proceedings shall be taken in the order shown above and shall (so far as not previously concluded) be brought to a conclusion at 11.25 a.m. on Tuesday 18th January: 
 Clauses 1 to 6; Schedule 1; Clauses 7 to 15; Schedule 2; Clauses 16 to 30; Schedule 3; Clauses 31 to 45; Schedule 4; Clauses 46 and 47; Schedule 5; Clauses 48 to 52; remaining proceedings on the Bill; 
Good morning, Sir John. It is nice to see you in the Chair this morning. I am looking forward to your keeping us in order as we discuss this important Bill, which is the beginning of the process of merging Inland Revenue and Customs and Excise into a new department, Her Majesty's Revenue and Customs. First, I welcome the Hansard Reporters, the Clerks—who will advise the Committee—members of Her Majesty's Opposition and my colleagues to our consideration of the Bill. 
On the programming motion, there have been extensive discussions between the Government and Opposition parties on our progress on the Bill, and that includes agreements on sittings. There are to be two sittings today and one on Thursday, and we are to conclude our considerations next Tuesday morning. I will do my very best to ensure that the Committee is fully informed of the Government's thinking on the Bill. As promised, draft regulations have been made available to all Committee members. 
Perhaps I should say something, by way of introduction, on the Government amendments. They represent, for the most part, clarifications of or modest improvements to the Bill as introduced. I have been keen to ensure, through the early introduction of the Bill, that hon. Members have had the opportunity to consider its contents well before this scrutiny stage. That has meant that there are now some areas where the Bill needs to be improved. I have done my best to ensure that the Committee had advance notice of the amendments and an explanation of what they do. 
As I have explained, the Government amendments fall into various groups. First, there are technical and consequential amendments on the establishment of Her Majesty's Revenue and Customs. Also, there are  improvements to secure the operation of the new department—for example, to ensure that provisions are applied appropriately in Scotland—and amendments consequential on the establishment of the Revenue and Customs Prosecution Office, including the introduction of three clauses providing for the disclosure of information to the director of that office. 
I will provide members of the Committee with as much detail as they require when I move the amendments, but I assure Members that none of the amendments introduce new concepts to the Bill, and none make any changes to the principles embodied in the clauses that would mean that they were different from what is set out in the explanatory notes. Both in my letter sent before the Christmas recess—dated, I think, 20 December—and in the letter that I sent to all members of the Committee yesterday, I provided the full details. I explained to hon. Members on Second Reading that such Government amendments would be necessary. 
Now that I have made clear how the Government intend to improve the Bill, I hope that the Opposition will forgive us these amendments. However, I am sure that they will have something to say on the number of them, but such a number is inevitable given the scale of the task of bringing such huge pieces of legislation together. I look forward to our deliberations in Committee.

Andrew Tyrie: First, may I welcome you to the Chair, Sir John? It is good to see you.
I was concerned about the scale of the amendments, even though, as the Minister suggested, they appear to be technical and consequential, and in their full impact relatively minor. I was depressed to find that so many amendments had been tabled at this late stage, for which the Minister has already apologised. After all, this is not exactly rushed legislation; it has been a gleam in the eye of a number of people for many years. People have been thinking about how to put it together for a long time, yet right at the last minute and even despite the clarity with which the Opposition put forward their preparedness to give the Government a fair wind on the principle of the Bill, we find them wanting to rush through amendments at a late stage. I deprecate that. It looks like poor drafting and management of the Bill. I regret that, but as the Minister has apologised I will not prolong this discussion.

David Laws: May I also welcome you to the Chair, Sir John? It is a pleasure to serve under you again. I also welcome the Paymaster General and the Economic Secretary to the Committee.
We had a good debate on the substantive issues in the Bill on Second Reading on 8 December. I suspect that our discussions in Committee will be far narrower. As we discussed, it is a fairly minimalist Bill, so there are no big issues of principle at stake in most clauses. There are some important issues, particularly that of the prosecuting authority, which I look forward to debating, and I look forward to being  joined by my hon. Friend the Member for Torridge and West Devon (Mr. Burnett), who is an expert on some of these matters and will no doubt make an effective and useful contribution.

Dawn Primarolo: Indeed.
Question put and agreed to.

John Butterfill: I remind the Committee that there is a money resolution for this Bill, and copies are available in the Room. I should also like to remind right hon. and hon. Members that adequate notice should be given of amendments. As a general rule, I do not intend to call any starred amendments that may be raised during an afternoon sitting of the Committee.

Clause 1 - The commissioners

Question proposed, That the clause stand part of the Bill.

Andrew Tyrie: I want to use clause 1 to make only three points. You can rule me out of order on each one, Sir John, but I will be so brief that by the time you have got up I will have finished.
First, I want to commend the minimalism of the Bill and thank the Minister for delivering pretty much what she said she would deliver when we met to discuss it. We will not oppose the principle of the merger, as we made clear on Second Reading. Secondly, we have specific concerns about powers, confidentiality in particular, and the assessment of the overall benefits of the merger. We will need to discuss those points as the Bill goes along. Finally, we are blessed with an excellent report by the Treasury Committee. The Deputy Chairman is sitting behind me, and I commend him and that Committee for having produced a document that will enable us to scrutinise this Bill much better than would otherwise have been the case.

David Laws: The clause deals with the responsibilities of the commissioners in the new combined department. One issue that came out of Second Reading, which the Paymaster General may wish to comment on, was the question of their responsibilities to Ministers in the Treasury and whether the existing structure, where the new combined department will report to a number of different Ministers, is sensible in the long term. That issue was raised by the Chairman of the Treasury Sub-Committee in the debate on 8 December. The Paymaster General appeared to indicate that her mind was not entirely closed to developments in the Treasury and to consolidation of the accountability of the commissioners to one Minister, rather than two or three, which I understand to be the present situation. Will she comment on that?

Dawn Primarolo: The hon. Member for Chichester (Mr. Tyrie) has laid out the parts of the Bill that he wishes to concentrate on. I will respond to those points when we reach the relevant clauses.
For clarity, we also provided the policy areas that the Economic Secretary and the Financial Secretary work on within that remit. If the hon. Member for Yeovil wishes to explore that further, I will be more than happy to do so when we come to clause 10—or to other clauses, if that is appropriate. There are amendments tabled to clause 10 about Treasury independence of direction, and how to meet the requirements for confidentiality while protecting taxpayers and discharging statutory responsibilities—I was going to say in a quasi-legal fashion, but actually to enforce the law. Other matters are also involved, such as what the relationship is with the Ministers on policy, and what the routes are for Parliament in ensuring that there is a Minister and a chairman who will be accountable to it, so that Parliament is properly involved. 
Question put and agreed to. 
Clause 1 ordered to stand part of the Bill.

Clause 2 - Officers of Revenue and Customs

Dawn Primarolo: I beg to move amendment No. 5, in clause 2, page 2, line 4, at end insert—
 '( ) Anything (including anything in relation to legal proceedings) begun by or in relation to one officer of Revenue and Customs may be continued by or in relation to another.'. 
The amendment gives me an opportunity to demonstrate the type of technical amendment that is before the Committee. The amendment will clarify the legal position, not change it. 
As the amendment is technical, it might help if I briefly explain the clause. It establishes a single work force for Her Majesty's Revenue and Customs. It provides for the commissioners of Revenue and Customs to appoint staff, who will be known as officers of Revenue and Customs. Officers will work under the direction of the commissioners, whether they are  exercising a commissioner's function under clause 12 or one of the officer's initial functions under clause 5. Like the commissioners, officers will be civil servants. 
The description of officers of Revenue and Customs replaces the previous descriptions of staff of the predecessor departments—for example, inspectors, collectors and receivers. Thus, I think that Committee members will welcome the amendment; what it does is fully in line with the modern approach to the designation of Inland Revenue staff, such as that taken by the tax law rewrite project—which I know Committee members are very familiar with. The amendment to clause 2 makes it clear that there is continuity for actions, including proceedings, that are begun by one officer of Revenue and Customs and continued by another. This minor and technical amendment applies provisions in existing legislation: section 1(3) of the Taxes Management Act 1970 and section 145(2) and (4) of the Customs and Excise Management Act 1979. It applies those requirements across Her Majesty's Revenue and Customs activities. 
For example, if an officer in the process of routinely examining a taxpayer's records considered that there was a possibility that a criminal offence had been committed by that taxpayer, it would be highly unlikely that the initial officer would have the skills and experience to investigate such a case. Therefore, although the initial officer may well raise an assessment of tax due, they would refer the case to specially trained officers, who would conduct the investigation, relying on the work that had already been undertaken by the case officer, and who would have the authority to use the powers appropriate to such cases. Although the two Acts that I mentioned provide for that, for the sake of clarity the provision should be included in the Bill as well, so that it is absolutely clear that those sections move across. That is what the amendment provides for. 
I hope that, with that explanation, the Committee will agree that this is a reasonable amendment. It is intended to ensure that when people read the Bill they will clearly understand the continuity that is laid out in other legislation. They will not have to go to the other two pieces of legislation to understand that point. 
Amendment agreed to. 
Clause 2, as amended, ordered to stand part of the Bill. 
Clause 3 ordered to stand part of the Bill.

Clause 4 - Commissioners' initial functions

Question proposed, That the clause stand part of the Bill.

Andrew Tyrie: I resisted the temptation to ask the Minister to read out clause 1(2) or clause 3(2) to the Committee—I certainly could not have managed to do so myself.
The one general point that I want to make at the beginning of this group of clauses is that because this is, to a large degree, a consolidating Bill—I am talking not only of this group of clauses, but more widely—or a tax law rewrite, it would be immensely helpful if we could have a derivations table for the legislation. We have had a clear briefing that the legislation is minimalist, that there is nothing of substance, that there is no fundamental change in powers and that it is purely mechanistic. The Minister has reiterated that today. 
There was a meeting on 6 December between officials and interested parties—30 or 40 people who follow these things closely. The Government have listened to a number of their concerns in the Bill. That is important. However, at that meeting, officials were asked to relay to Ministers a request for a derivations table. As far as I am aware, we have not yet received that table. Is the Minister prepared to commit to producing one? I think that interested parties and those following the Bill carefully would find that table extremely valuable. It is the best test of the extent to which the Bill is minimalist.

David Laws: Clause 4(1) clearly sets out the areas in which the commissioners will have responsibility. It is divided into paragraphs (a), (b) and (c), which relate to existing areas of Inland Revenue responsibility, Customs and Excise responsibility and the management of tax credits. We accept that the Bill is minimalist and, to some extent, we welcome both that and the fact that there will be an opportunity to put together the two departments without dealing at this stage with some of the bigger issues about powers.
However, when we are setting out what the powers of the commissioners should be, there is a real issue about whether tax credits should be included in the new department. This is an opportunity to consider whether they should be included. I want to probe whether the area of tax credits, which many people feel is, in reality, more of a social security benefit, belongs in the new, merged department, which will have considerable responsibilities and a large number of staff and, as I understand it, will focus for its primary responsibility on closing the tax gap. That is different from much of the work that is involved in the administration of tax credits. 
Without going beyond the bounds of the Bill, I think that there is a great deal of feeling in and beyond Parliament that tax credits may be in the wrong area. They should not be controlled by the Treasury, but are naturally part of the Department for Work and Pensions. Perhaps this moment, when we are thinking about what the new, merged department should  consist of, is a good opportunity for us to think about whether we want clause 4(1)(c), which would give commissioners the responsibility for tax credits as well. 
The Paymaster General may well say that it is premature to consider the organisation of the new, merged department. However, Sir John, you will no doubt have seen some of the speculation in the last couple of weeks about Government plans to restructure the Treasury after the general election—the so-called Birt plans, as referred to in a recent article. The article said that there are plans to strip down the Treasury after the election, take away its powers of public expenditure and transfer Treasury Ministers and others to the Cabinet Office under the existing Chancellor of the Duchy of Lancaster. So there is a real issue about whether the Government have plans for the future structure of the Treasury and whether those might, as the recent article in The Sunday Telegraph suggested—

John Butterfill: Order. I am perfectly happy for the hon. Gentleman to refer to this issue briefly but I hope that we will not be drawn into a debate on speculation about the future of the Treasury.

David Laws: I certainly would not want to get drawn into that debate and I am grateful for your guidance, Sir John. Obviously you appreciate that the issue is extremely relevant because if the Government plan to restructure the Treasury, possibly in a few months, while we are passing new legislation that would cut across those longer-term plans of the Government, and that would be damaging in terms of Government organisation. It would also be a waste of Parliament's time. I hope that the Paymaster General will be able to comment on that issue and shed some light on the stories about the longer-term intentions of the Government for the powers of the Treasury and the merged department.

Dawn Primarolo: Two issues were raised. First, the hon. Member for Chichester asked about the derivations table. It is not appropriate for it to be part of the Bill. [Interruption.] I did not think that the hon. Gentleman meant that. I am glad to see him agreeing with that because it is not a matter for consideration. However, I can see no reason why we should not produce that table. We can produce it for the Committee. It could be part of the explanatory notes. That has been done before. Tax law rewrites established that process. I think that during the proceedings dealing with one Finance Bill I agreed that we would produce a table in the explanatory notes as an explanation for some clauses. I shall try and get that completed as quickly as possible so that Committee members have it for their reference, as will those outside the House, but it will not be part of the Bill. I do not think that the hon. Gentleman was actually asking for that.

Andrew Tyrie: I thank the Paymaster General for her co-operation on that point. I know that there are many people outside this Room who will be delighted to see that document.

Dawn Primarolo: I am glad to hear that. I am sorry that I did not provide it before so that the hon. Gentleman did not have to ask.
On the question raised by the hon. Member for Yeovil, I want to make it clear that the O'Donnell review considered the issue of tax credits and their importance within the Revenue department, and thus the new merged department as an integral part of the tax system. It is a matter of Government policy that tax credits are dealt with by the Revenue department. 
The hon. Gentleman has expressed his agreement with the idea that the Government should use a minimalist Bill to begin the merger. In considering the new department, it was clear that tax credits should be clearly included in its responsibilities. If at some later stage, in decades to come, another Government decide that they do not want tax credits to be dealt with by the new merged department, primary legislation will be required to move it, which is right and proper, as I have stressed on Second Reading and at the beginning of today's proceedings. 
We have taken the two departments and brought them together in a machinery of Government Bill to ensure that they can continue their functions and that we can begin the process of considering the duplications and ensuring efficiency. I say to the hon. Gentleman that if changing that is the policy of his party, primary legislation would be required. That is absolutely crucial in order to give security and clarity to our staff and the commissioners concerning what the new department is expected to do.

David Laws: I am grateful to the Paymaster General for giving way. We are dealing with a serious point, and to put it on the record, would she explain what the reasons are for keeping the administration of tax credits in the department for the foreseeable future rather than allowing them to be dealt with by the Department for Work and Pensions?

Dawn Primarolo: I shall look up the references in the O'Donnell review and give them to the hon. Gentleman during the next sitting so that he can re-read the published review of why tax credits are dealt with by the Revenue and why it is Government policy that they should remain there.
I do not think that it is appropriate—you may possibly stop me, Sir John—to rehearse the policy and political reasons for the existence of tax credits: the importance of their being within the tax system, the removal of the stigma, the encouragement to work and the contributions to child care and to children as part of an anti-poverty strategy, which is central to the functions that the Treasury has outlined and that the new department will continue to administer. I know that the hon. Gentleman has a different policy review in mind but that is not a subject with which I feel I should engage more directly today. I would just say to him that one should be careful about what one reads in newspapers. 
Question put and agreed to. 
Clause 4 ordered to stand part of the Bill.

Clause 5 - Officers' initial functions

Andrew Tyrie: I beg to move amendment No. 78, in clause 5, page 3, line 16, at end add—
 '(4) Insofar as an officer of Revenue and Customs is exercising a function which relates to Value Added Tax, subsection (1) shall not apply.'. 
I may, as I mentioned earlier, and with your permission, Sir John, refer in passing to one or two other clauses; of course I should not reiterate those points on stand part. The clauses in question are of course closely interlinked. They are outwardly mild-looking clauses, dealing with Customs and Revenue powers. My amendment is, as I am sure the Minister knows, a probing amendment. I shall not press it to a vote. I want to test the Minister's commitment to a thoroughgoing review of the new HMRC body's powers. 
It is important to have the current position clear in one's mind. Clauses 5 and 6, taken together, limit the extent of the new HMRC officials' powers over revenue matters. The provisions are intended to prevent revenue matters from being made subject to excessive powers such as those that the Customs can at present exercise. For example, the extensive Customs powers to collect VAT, by which its officers can turn up with a warrant, raid a place and smash down the door to get a document, would not be available for a standard income tax assessment. It is important that we maintain that distinction. 
That discrepancy in powers can be illustrated in many ways. It is worth comparing for a moment section 20 of the Taxes Management Act 1970—which enables the Inland Revenue to go to commissioners for a warrant to obtain a document—with what Customs does, which is to exercise a much more draconian power on the back of a police-style search-warrant. Clauses 5 and 6 reflect the concerns that have been expressed by many that the Revenue should not have those much more heavy-handed Customs powers—the Treasury Committee report and the written evidence that was given to the Committee provide elaboration on that topic. 
In quite a clever way—I commend the drafting—clause 6(4) provides that former Inland Revenue matters cannot be dealt with under Customs powers; at least, that is what I take that subsection to mean. My amendment investigates what happens if things are the other way round. What about circumstances—and this is just possible—in which the Revenue may have more powers than the Customs? What restriction is there on Customs using Revenue powers? Are we sure whether we have that stable door bolted before the Bill is passed? Why is there no parallel restriction on Customs officers using Revenue powers? 
The amendment that I have tabled is intended to provide assurance of that kind only with respect to VAT. I could have drafted it more widely, but I think that it serves its purpose in making the points that I want to make. I should be grateful for an explicit assurance, if this is the view being taken, that Customs already has all the powers enjoyed by the Inland  Revenue. Even with that reassurance, we should be left with a very uneven distribution of powers within the new body, HMRC. That is inevitable, stemming from the different cultures of the two bodies. We have discussed that many times: Customs has a quasi-policing inheritance—the cutlasses on the wall have been mentioned in the House—whereas the Inland Revenue has a gentler established approach to getting the money in from, as I think I put it on the Floor the House recently, reluctant but largely honest taxpayers. 
My second question is: what plans do the Government have to harmonise that discrepancy? I gather that the Government are considering a consultation document that may come out in the next few weeks. I should be grateful if the Minister would say more about that. As part of that process, are the Government going to commit to a full consultation—that is, one in which ample opportunity is given to all parties to offer their views? 
If the Government are committed to a full and meaningful consultation, is there not a case for a more thoroughgoing review of the whole issue? You probably remember well, Sir John, the Keith Committee review of 20 years ago—I am not alluding to your age, but to your political experience. Some 20 years ago Lord Keith looked into the issue and came up with a number of balanced and interesting recommendations. He did a good job, as everyone agreed. For example, he decriminalised many VAT offences. I believe that those who sent in late VAT returns prior to Keith thereby became criminals. That was a crazy situation and there needed to be an adjustment, so such acts were made civil offences. The world has moved on a lot in the 20 years since Keith and we could probably do with another thoroughgoing review. 
Let me give four reasons for that change. The first is the electronic revolution. When tax authorities have to consult eBay to collect revenue, that reflects a new reality in the tax collection world. The second reason why we may need to consider a review is the emergence of Europe in tax matters and the intrusion of the European Court of Justice in our affairs. Whatever the Government's formal position on Europe not having any influence on tax, the truth is that it does—do not worry, Sir John; I will not elaborate on that issue, but Europe is a factor. 
Thirdly, there is increasing oversight of customs practices by the European Court of Human Rights. The Court has recently reviewed the Hansard procedure, whereby those who own up will be all right. However, some people have found themselves being Hansarded several times over, which is what happened to Lester Piggott and Ken Dodd. I think that Piggott was Hansarded three times, after which the decision to prosecute was taken. The Hansard procedure has been given a brush-up in the light of the ECHR review, but that brush-up was an ad hoc, piecemeal improvement. I suggest that a more thoroughgoing review might be necessary. The fourth reason is that recent massive Finance Acts have moved us into another physical dimension, owing to the sheer volume of legislation.  The size of those Acts probably justifies looking at the extent to which, bit by bit, they may have altered the relevant powers. 
My final question is: will the Minister agree to a full, Keith-style review? Will she set out the principles that would lie behind any change in, or harmonisation of the powers that she might consider? I could do that for her now—clearly, one would allow a department to take a power only if it was deemed necessary, if its application was not onerous for taxpayers and if it was subject to appropriate checks and balances. I would be interested to hear the Minister's view on that. 
I have a fifth question: what is the Minister's time scale for harmonisation, bearing in mind that any changes will be in primary legislation and there will be quite a lot of that to amend? The existing powers are, I believe, in the Taxes Management Act 1970, the Customs and Excise Management Act 1979, and the Value Added Tax Act 1983. There is of course also some landfill tax and environmental legislation. 
In looking at this area, we are dealing with something that is of great concern to the outside community. I have some advice here from the Institute of Chartered Accountants of Scotland, which has picked up on a point in a draft Government document on the review of powers. The Government statement said that 
''any officer of HMRC, whether formerly an officer of Customs and Excise or of the Revenue, can use those powers that exist in relation to the specific tax they are looking into. If an officer of HMRC obtains information that is also relevant to other areas of HMRC they may pass on that information for immediate and future follow-up action.'' 
The great concern of ICAS is that this statement may lead to the transfer of powers resulting in an extension by stealth to the powers that each department currently possesses. In other words, an officer could say, ''While you are in there, would you take a look to see if you can find X or Y?'' We would then find that these powers are being used in much more extensive ways than were ever initially intended. We do need reassurance on that issue. A thoroughgoing review, such as I am calling for, is probably the best way to provide that reassurance and I hope the Minister can help on that point.

David Laws: Briefly, I want to agree with many of the general points about powers that the hon. Member for Chichester has raised under amendment No. 78 to clause 5. I really have only two brief points to add. The first concerns the serious point about the consultation document which came up as a reference on Second Reading. We need to have as much information as possible about when that will emerge, and whether it will be before the end of Committee hearings. Secondly, on a more detailed point, I want to ask the Paymaster General for clarification on clause 5(2) and the definitions under paragraphs (d), (e), (f) and (g). May we have clarification of the precise distinction between paragraphs (d) and (e), and (f) and (g) in subsection (2), and whether it would be possible to consolidate these definitions in some way, so as to reduce the burden of things? Surely it is not necessary to list all of these particular roles in this way?

Dawn Primarolo: I assumed on seeing amendment No. 78 that the hon. Member for Chichester was tabling a probing amendment. I could not believe that he would actually remove powers that would enable the effective and efficient collection of VAT. So I am going to respond to the points he was making with regard to powers, rather than the substance of the amendment, unless he particularly presses me. The substance of the amendment basically removes the ability to enforce and collect VAT. He referred to those very few taxpayers who, none the less, require consistent encouragement and persistence from Customs in order to pay the VAT that is due to the Revenue departments. So I shall concentrate on the points made by both hon. Gentlemen about the principle of powers stretching across the clauses. The hon. Member for Chichester identified why we need to read clauses 5 and 6 together. I start with the first position.
Hundreds of different powers apply across the many regimes currently administered by the Inland Revenue and Her Majesty's Customs and Excise. I take the word power to mean the right of the department concerned to take discretionary action in respect of an individual taxpayer in order to monitor and assist and, when necessary, to enforce compliance with the law. It is almost always capable of being backed by sanctions. 
I want to deal with all the questions on consultation and its scope in one go. First, I shall deal with the specific questions about the restrictions on Revenue and Customs powers as they are transferred to the new department. The hon. Gentleman asked about a point that he said had been raised in their submission by the Scottish accountants, which was on information sharing between departments. That already goes on. I understand that such information has been collected at information gateways for some time. That adds to the complexity of trying to approach a difficult series of questions. 
The hon. Gentleman said that Customs uses its more extensive powers to enforce Customs and Excise-based tax, but that sharing the information could result in what might be called information creep. However, that already happens; and in order to ensure that the departments fulfil the objective of protecting the Revenue base through the merger, which I know is of concern to the hon. Gentleman, that has to remain the case.

Andrew Tyrie: There is a huge difference between the staff of two independent and separately run departments deciding to exchange a piece of information—having thought about it carefully and perhaps having consulted a superior—and two people sitting side by side, cheek by jowl or on opposite sides of the corridor having a chat each afternoon about a particular client.

Dawn Primarolo: I do not know whether the hon. Gentleman has noticed, but those teams have been working side by side for a considerable time, both under the previous Government and under the closer working strategy. It is not new.
The hon. Gentleman asked whether there was a parallel provision—he said that the Bill appeared to restrict Customs powers only to Customs taxes, but that it seemed to work differently for the Inland Revenue. [Interruption.]

John Butterfill: Order. I remind hon. Members that long and extensive conversations in Committee are not permitted. Brief conversations on matters before the Committee are permitted. I should be grateful if right hon. and hon. Members recognised that.

Dawn Primarolo: Thank you, Sir John.
As the hon. Member for Chichester said, clauses 5 and 6 are closely related. A parallel arrangement for the Inland Revenue can be found in clause 6(2), which states that the Revenue has a new transfer ability insofar as it is exercised in relation to Revenue functions. That brings me directly to the question of consultation. 
I agree entirely with the hon. Gentleman that it is about checks and balances. The consultation will be a large exercise, given the overriding requirement of the new department to protect the Revenue base. It will cover the appropriateness of existing powers regimes, including the option of the abolition of the risk assistance, the name for the Customs powers that the hon. Gentleman was referring to. It will look at the benefits of greater consistency of approach across taxes and duties in respect of requirements to provide information, interest, surcharge regimes for late payment, penalties for non-compliance and rights of appeal. The hon. Gentleman alluded to that when he was comparing the level of authority required in some of the Customs legislation for use of some of the powers with that required in the Inland Revenue. It works in the other direction as well—there are some Revenue powers where Customs powers require a higher authority. It will go to the heart of the question that the hon. Gentleman is also raising: what are the modern powers and practices that the new department—I think the hon. Gentleman said ''in this changed world''—might need to allow it to build on the considerable success to date and deliver its public service agreement targets? What might it need to ensure the taxpayers'—on Second Reading I said ''experience'', which caused some hilarity in the Chamber, so let me rephrase it—contact with the department is efficient for the taxpayer as well? Rather than having to go to lots of different places, if the taxpayer is dealing with one department, the taxpayer  should be able to tell it certain types of information once, to ensure that we have efficient services with improved compliance. 
In addition, the hon. Gentleman raised a question, as an example of the Hansard approach, about serious fraud. The revenue departments are currently reviewing their civil procedures and working practices in cases of suspected serious evasion. This may involve—I will have to wait and see what the review says—changes and new procedure under Her Majesty's Revenue and Customs. It is important to say clearly that the department will be seeking the views of all those that the department regularly consults with, and who will have views on these matters. 
I am sure that the hon. Gentleman and Members of this Committee can see that that is a vast task. The process is that a consultation document will hopefully be issued by the end of the month—that is my intention and what we are working towards. 
As the Minister, I am hoping to start the legislative process for the required changes in the Finance Bill 2006. It is difficult to say whether it will all be dealt with in that Bill, whether that is the appropriate vehicle, or how large the exercise is. That may need to be revisited. I am trying to emphasise that we are going to try to be clear, that there will be proper consultation and that this matter should not drift for a considerable time. However, we need to have some causal principles and everybody—Members of this House, Ministers and the bodies that we shall be consulting—needs to understand the direction that we intend to take. We shall use as a model—this is a compliment to the previous Government—the very successful model that they used for consultation when introducing self-assessment. It works extremely well, is focused and moves us forward. 
I hope that that supplies the information that the hon. Gentleman was seeking with regard to the intentions. I have clarified the check in relation to the Inland Revenue and I have made it clear that there is already information sharing between the two departments, and has been for some time. He referred to the harmonisation of powers. I call them the appropriate powers. I think that we are basically talking about the same thing. However, that will be underpinned by the fact that in some respects we have quite different taxes operating. VAT is very different from corporation tax or national insurance. None the less, there needs to be some understanding so that people are clear on the current process. 
The last point was that raised by the hon. Member for Yeovil in connection with the drafting. The Bill converts all of the terms used in current legislation to ''officer of Revenue and Customs'', as I said earlier. We are attempting to simplify things. All the terms are listed to ensure that all references from different legislation over many years are picked up. That returns to the point that I made on the programme motion: it is complex ensuring that all the legislation dovetails in. That is the answer to the hon. Gentleman's question. 
I hope that the hon. Member for Chichester will not press his amendment to the vote. It would be a very expensive commitment by the Opposition. I am not  going to be mischievous, because I know that it was only a probing amendment. I hope that I have dealt with all the issues. He made a point about having a Keith-type commission. I hope that he can see that the process is to deal with all the issues, but in a certain time frame and with openness. That is a good way to proceed, as he said, in a modern world—rather than using a process that worked 20 years ago.

Andrew Tyrie: We have travelled some distance. The Minister has managed to be mischievous and reasonable at the same time on one or two occasions. She has taken us some distance, but she has fallen short of explaining what—to use her phrase—''proper consultation'' is. It would be helpful to know. She says that we will use the precedent of self-assessment. Although self-assessment was a big process, it was far less fundamental and far less sensitive—although it is sensitive in itself—than the issues that would be raised by a fundamental change in the powers of the institutions. There is nothing that upsets our constituents and businesses more than the heavy-handed use of those powers, or worse, their occasional abuse or the act of apparently overstepping them. On the Revenue side, the commissioners spend quite a deal of time policing that and, as we know, there is a tribunal system on the Customs side. Again, those are different approaches to bringing the checks and balances to the whole system.
I am a little perturbed. The Minister says that she will do this in the Finance Bill 2006. That is a relatively short time frame and, who knows, perhaps I will be presenting the Finance Bill 2006 and she can stand here and have a go at what I propose, which would be putting somebody in charge of a thoroughgoing review who is demonstrably independent and who commands widespread respect in the business community and among those who are affected by the exercise of those powers. 
I do not expect the Minister to make a decision on the spot because I have not discussed the matter with her beforehand, but I ask her to give me some reassurance that she will go away and think about whether it might be worth while finding somebody of that type to put together a small committee with a relatively tight time frame to do exactly what I am describing: to go through the issues that we have both agreed we need to examine, to report back, probably to go through some quick scrutiny by the Treasury committee and then to bring the matter before us as legislation that amends the four or five major Acts to which I have referred.

Dawn Primarolo: The self-assessment process saw a consultation document, a response to it, a committee drawn from the representative bodies set up to consider the proposals for the new department, draft legislation produced, its consideration by that committee and its presentation to Parliament. It was a pre-pre-legislative process. There are smaller examples of that: the review of intellectual property rights and the consideration of the large tax changes we made, for example. The only point missing is that which the hon. Gentleman made, when he asked whether we should  appoint someone specifically. I have not got so far as to determine who would be responsible. I will consider it, but I envisaged the process as this Committee expressing its view and, if the Government did not quite agree, the Government being accountable. When the legislation came before Parliament it would be up to us to explain why we had chosen the drafting that we had. This is not a particularly huge issue. I will consider it and write to the hon. Gentleman when I have taken a view. It is not that interesting. I can say, however, that the appointee will not be a Member of the House.

Andrew Tyrie: I am very grateful for that answer, and it sounds to me as though I have got somewhere between half and a whole loaf. In this game, you quit while you're ahead. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn. 
Clause 5 ordered to stand part of the Bill. 
Clause 6 ordered to stand part of the Bill. 
Schedule 1 agreed to.

Clause 7 - Power to transfer functions

Question proposed, That the clause stand part of the Bill.

Michael Fallon: I am grateful for the chance to speak to this clause. It gives me more concern than any other. The power to transfer functions within the new department is almost a Bill within a Bill. The Paymaster General describes the approach of this two-stage legislation as minimalist. With a 40-page Bill and a 60-page catalogue of new amendments before the Bill has even started, I shudder to think what the maximalist approach would be. Leaving that aside, she says that a major Bill will follow. However, before that major Bill follows or further clauses are inserted in the Finance Bill, this clause has the effect of a licence, allowing Ministers to transfer powers willy-nilly under the Ministers of the Crown Act 1975. There has been widespread concern about that, expressed on Second Reading and in my Committee. I draw this Committee's attention to our recommendation in the report that I had the honour to Chair, to which reference has been made. We said that
''we are concerned that the powers that the new department needs to discharge its functions should be subject to proper parliamentary scrutiny.'' 
I shall return to that point. 
The Opposition are not alone in that concern. The Public and Commercial Services Union has also written to me and, I suspect, to other members of the Committee to say that it is concerned about the strength of the clause. It would like the entire clause to be deleted. If it is not deleted, the PCS would like to  ensure that the transfer of any functions in the future is subject to full debate in both Houses, ideally through primary legislation. That is the issue: whether the clause should be considered in isolation. 
Let me run through the various concerns. First, the clause appears to treat commissioners and their officials almost as if they were Ministers of the Crown. That, presumably, is not and could not be the case with existing Revenue or Customs board members or their staff. I am therefore bound to ask the Paymaster General why this power is being taken now when it was not considered necessary back in 1975. After all, we are constantly told that this is a modest Bill. 
Secondly, it seems that we are being asked to approve the transfer power before we are clear about exactly what powers will be involved. I believe that the Paymaster General told us this morning that the consultation on the powers for stage 2 will not now be available until the end of January. It is unfortunate that we are being asked to approve the clause and to conclude our deliberations in Committee before the consultation document is available and before we know what powers may be transferred back and forward. 
Thirdly, the general nature of the power makes a mockery of the Paymaster General's assurance on Second Reading, when she said: 
 ''The Bill achieves that''— 
that is, not changing the purpose of the power— 
''by ring-fencing powers to prevent their inadvertent extension within HMRC.''—[Official Report, 8 December 2004; Vol. 428, c. 1175.] 
However, clause 7(3)(b)(i) states that when the power is transferred: 
 ''An Order in Council . . . may''— 
not ''shall''— 
''restrict or prohibit the exercise of specified powers in relation to that function''. 
Hard though I may try, I cannot reconcile the looseness of ''may restrict or prohibit'' with the Paymaster General's assurance that she is ring-fencing the power. 
Fourthly and finally, my concern is that the orders made to transfer the various functions will not, as others have wanted and as the Treasury Committee recommended, be subject to full parliamentary debate, because—I hope that the Paymaster General will correct me if I am wrong—the statutory instruments under the Ministers of the Crown Act 1975 are subject only to the negative procedure. Therefore, when an important power is transferred, it will very likely be transferred without the full parliamentary debate that it warrants. 
The clause ranges too wide and gives rise to serious concerns that the Paymaster General should now address.

David Laws: I very much support the comments made by the hon. Member for Sevenoaks (Mr. Fallon) on clause 7. I hope that the Paymaster General will have  a convincing explanation for the clause, or will reconsider whether it is appropriate. She will know that others outside this place have expressed concerns about the clause, including the PCS, to whose representations the hon. Member for Sevenoaks referred.
Clause 7 clearly enables the new Revenue department's functions, other than revenue or tax credit functions, to be transferred to a ministerial Department and for any such Department's functions to be transferred to the HMRC by, as the hon. Gentleman said, Order in Council, rather than primary legislation. 
I do not want to take us back to our earlier debate about Lord Birt's proposals for reorganising the Treasury after the next general election, and I am suspicious about whether the Paymaster General would allow extensive reorganisation. None the less, the list of the Inland Revenue's existing functions and responsibilities on pages 26 and 27 of schedule 1 is quite long, with 31 items in total. I may be missing something, but page 3 of the explanatory notes indicates that it is the revenue or tax credit functions that are ring-fenced in existing legislation and which would therefore need primary legislation to change them. 
It is fairly clear what the tax credit functions are, and the revenue functions are defined at the bottom of page 3 as relating to 
''taxes, duties and national insurance contributions''. 
Unless I am missing something, however, that leaves out a considerable number of the Inland Revenue's existing responsibilities. I tried to count how many of the 31 items are covered by the ring-fencing referred to in the explanatory notes, and I would say that more than half are not. It is a long list, going from child benefit and child trust funds right down to more contentious alleged duties such as stamp duty land tax and responsibilities for statutory pay issues. 
I would therefore like the Paymaster General not only to respond to our other points about clause 7 and to explain the justification for the clause, but to state explicitly—either today or in a letter to the Committee—which of the Inland Revenue's existing responsibilities, including those listed on pages 26 and 27, can be transferred without primary legislation. 
As the hon. Member for Sevenoaks said, it is unfortunate that we are dealing with something of this significance without understanding more about the Government's intentions in respect of the powers involved. We will not get the consultation paper on the issue until quite a lot later in January, if then. It would, therefore, be sensible to defer these issues to a later date.

Dawn Primarolo: Both hon. Members are under a misapprehension about what can and cannot be transferred in or out of the department of Her Majesty's Revenue and Customs. It would therefore help to explain what other Departments do, and to explain that this is a standardisation to reflect that  practice, that it works perfectly well and that nobody has complained. I have been in the House since 1987, and there have been different machineries and Government changes, and such powers have been used.
The arrangements for parliamentary scrutiny of transfers into or out of Her Majesty's Revenue and Customs will be no less rigorous than those that already exist for transfers between other Departments. The Ministers of the Crown Act 1975 applies to a transfer by Order in Council, and the hon. Member for Sevenoaks is right that such a provision would be subject to the negative procedure. Those arrangements already work for ministerial Departments and have done so successfully for a long time. However, the Bill provides the additional protection of a ring fence for Her Majesty's Revenue and Customs on all revenue and tax-credit functions. 
So, there can be no transfer of anything connected with either tax credits or taxation in any shape or form from the new department by an Order in Council. The Government are merely putting in place the arrangements that work for other ministerial Departments. That means that the transfer of a function—for example, the collection of student loans, which the Inland Revenue collects on behalf of the Department for Education and Skills—is possible. A function could go in and out. The transfer of taxes is not possible. They are the core functions of the Department and are subject to a restriction. 
Let us be absolutely clear, because the department has a crucial function. Any transfer of anything to do with tax and its associated powers, or tax credits and national insurance, would require funding legislation, not an Order in Council. A power cannot be transferred under the provision without the associated function for which that power is bestowed. I want to keep repeating that point because it is a cause of misunderstanding. People think that the Departments will be broken up and that tax functions will disappear somewhere else or that there is some other agenda—the hon. Member for Yeovil keeps referring to that. Her Majesty's Revenue and Customs will have responsibility for revenue, tax credits and national insurance and those responsibilities cannot be transferred under the clause.

David Laws: Will the right hon. Lady give way?

Dawn Primarolo: Let me finish my point because it is very important. I will consider the hon. Gentleman's example. He does not want tax credits to be in the remit of the new department. If ever he thought that he might want to implement that, he would require primary legislation. If he decided that some other function needed to come into the remit of the new Her Majesty's Revenue and Customs that was not connected with the tax base, but that he thought would be sensibly administered by the department as an agency for another Department because it could do it efficiently—I cannot think of such an example—that could be done by an Order in Council. 
That restriction maintains the integrity of the tax system. It keeps the administration of those functions at arm's length from Ministers as those functions, and the powers that attach to them, cannot be transferred. 
In the case of other functions, other ministerial Departments already exercise powers intended to facilitate, for example, criminal investigations. Those Departments exercise those powers effectively and responsibly. The arrangements for parliamentary scrutiny of any future transfer are, with the exceptions that I have tried to explain, exactly the same as those that apply to transfers between ministerial Departments, subject to the additional protection for revenue functions. Those arrangements work effectively. Nobody, including PCS, has ever raised any complaints about the sensible way in which transfers between ministerial Departments operate. 
I am trying to be clear. I understand clearly why it is important for PCS, the other unions and the staff in the two departments that are soon to be the new department to be clear about the Government's intention. I understand their fear but I am trying to make it clear that, while understandable, it does not apply. Those arrangements already work for ministerial Departments and have done so for a long time. However, the Bill provides the additional protection of a ring fence for Her Majesty's Revenue and Customs department on all revenue and tax-credit functions. 
So there can be no transfer of anything connected with either tax credits or taxation in any shape or form from the new department by an Order in Council. The Government are merely putting in place the arrangements that work for other ministerial Departments. That means that the transfer of a function—for example, the collection of student loans, carried out by the Inland Revenue on behalf of the Department for Education and Skills—is possible. A function could go in and out. The transfer of taxes is not possible. They are the core functions of the department and are subject to a restriction. 
Let us be absolutely clear, because the department has a crucial function. Any transfer of anything to do with tax and its associated powers, or tax credits and national insurance, would require funding legislation, not an Order in Council. A power cannot be transferred under the provision without the associated function for which that power is bestowed. I want to keep repeating that point because it has caused misunderstanding. People think that the departments will be broken up and that tax functions will disappear somewhere else, or that there is some other agenda; the hon. Member for Yeovil keeps referring to that. Her Majesty's Revenue and Customs will have responsibility for revenue, tax credits and national insurance and those responsibilities cannot be transferred under the clause.

David Laws: Will the Paymaster General give way?

Dawn Primarolo: Let me finish my point because it is very important. I will consider the hon. Gentleman's  example. He does not want tax credits to be in the remit of the new department. If ever he thought that he might want to implement that, he would require primary legislation. If he decided that some other function needed to come into the remit of the new HMRC that was not connected with the tax base but which he thought would be sensibly administered by the department as an agency for another Department because it could do it efficiently—I cannot think of such an example—that could be done by an Order in Council.
That restriction maintains the integrity of the tax system. It keeps the administration of those functions at an arm's length from Ministers, as those functions, and the powers that attach to them, cannot be transferred. 
In the case of other functions, other ministerial Departments already exercise powers intended to facilitate, for example, criminal investigations. Those Departments exercise those powers effectively and responsibly. The arrangements for parliamentary scrutiny of any future transfer are, with the exceptions that I have so clearly tried to explain, exactly the same as those that apply to transfers between ministerial Departments, subject to the additional protection for revenue functions. Those arrangements work effectively. Nobody, including PCS, has ever raised any complaints about the sensible way in which transfers between ministerial Departments operate. 
I am trying to be clear. I understand why it is important for PCS, the other unions and the staff in the two departments that are soon to form the new department to be clear about the Government's intention. I understand their fear but am trying to make it clear that, while understandable, it does not apply. 
As to the powers to restrict functions, once again, revenue functions cannot be transferred. Beyond that, we would need to consider whether transferring functions would need to be restricted in another way.

David Laws: Could the Paymaster General give more insight into what makes one item in an area of responsibility a ring-fenced item whereas another is not? For example, will the child tax credit effectively be ring-fenced, in that primary legislation would be needed to transfer it, whereas child benefit and child trust funds will not be?

Dawn Primarolo: The hon. Gentleman is absolutely right with regard to tax credits, which cannot be transferred without primary legislation. He makes an interesting and important point about child benefit or national minimum wage enforcement.

David Laws: The trust fund?

Dawn Primarolo: The trust fund is associated tax and part of the provision of the department.

David Laws: Will the right hon. Lady give way?

Dawn Primarolo: If I can answer the hon. Gentleman's first question, I will be more than happy to give way and let him ask another one.
There are some functions—I would hesitate to call them minor—that are ancillary to revenue functions, particularly the national insurance fund. However, I want to check; I feel that I need a little more time to ensure that I can give a clear answer. My absolute intention was only to put the department on a par with the functions of all other Departments and to consider anything that it was doing outside what we might call its core responsibilities.

David Laws: I am grateful to the Paymaster General for being so patient. She seemed to indicate a moment ago that child trust funds would be one of the ring-fenced functions that would require primary legislation for transfer, which was not my assumption. Will she clarify whether that is the case?

Dawn Primarolo: On the hon. Gentleman's other points, stamp duty, stamp duty land tax and stamp duty reserve tax cannot be removed. I said that the child trust fund could not be removed, but he pressed me. The child trust fund is not part of the reserve on tax, whereas tax credits are. Again, I would be grateful if the hon. Gentleman allowed me to come back to him, because those points are important. Of course I will make my answer available to all members of the Committee.
I want to come to the heart of the concerns. Could the department be broken up and is that the intention? Reference keeps being made to that, but it is not the case. The hon. Member for Sevenoaks has rightly made it clear, both in the Treasury Select Committee and in this Committee, that the department needs to focus on the core functions identified in the Bill and that there is a need for protection. However, from time to time there are changes to the machinery of government. All the proposals allow is for those not associated with tax to be undertaken. 
I have no knowledge of any changes in the pipeline and would like in concluding to make it absolutely clear to those who work in the two departments that there is no hidden agenda. The Bill does exactly what it says it attempts to do. It does not set the foundations for a future action or a future agenda that is not being spelt out. The Bill makes sensible change where appropriate, transfers functions and flags up the need for change of discretionary powers, where there is agreement by everybody at a staged process. I hope that on that basis, and with that clarification, the hon. Member for Sevenoaks will not press his amendment. If he does, I will have to ask my hon. Friends to oppose it.

John Butterfill: Order. There is no amendment to press. The amendment was not called, and was dealt with by the debate on clause stand part. 
Question put and agreed to. 
Clause 7 ordered to stand part of the Bill. 
Clause 8 ordered to stand part of the Bill. 
Clause 9 ordered to stand part of the Bill.

Clause 10 - Treasury directions

Michael Fallon: I beg to move amendment No. 2, in clause 10, page 5, line 20, leave out 'of a general nature'.

John Butterfill: With this it will be convenient to discuss amendment No. 3, in clause 10, page 5, line 20, at end add
'and a copy of any such direction shall be placed in the Library of each House.'.

Michael Fallon: Amendment No. 2 is a probing amendment. Amendment No. 3, which has been grouped with it, is perhaps less so, but I would like to hear the Paymaster General's response.
I raised this point briefly on Second Reading, because I was concerned that the clause was too wide. It seemed to me that the distinction that the Paymaster General sought to make between directions of a strategic character and directions that might interfere or seek to micro-manage day-to-day or operational issues within the Department, which is a perfectly fair distinction, was not covered by the clause. 
The clause does not refer to directions of a strategic nature, but simply to directions of a general nature. I am concerned about that. The Paymaster General said that the reason that she wanted the power to issue directions of a general nature was first that she may want to direct strategy at some stage, which is an issue in itself. Secondly, she said that she wanted to be able to use the direction to call the department to account for the overall effect of the actions that it had taken. I do not actually think that that has anything to do with issuing directions. I think that it is a function of ministerial or parliamentary accountability, which can be—and probably is—covered in other particular ways. 
The difficulty is that when Ministers say that they will deal with strategy and that they will not interfere with day-to-day operations, in the end it is always up to Ministers to determine exactly where that dividing line should fall. The inclusion of the phrase ''of a general nature'' does not help us to draw the distinction that the Paymaster General wishes to draw between directions of a strategic nature and those that might seek to interfere with the day-to-day operation of the Department. 
Amendment No. 3 will, I hope, commend itself to the Paymaster General and to both sides of the Committee. If such directions are to be given—whether they are to be ''general'', as in the Paymaster General's wording, or strategic, as I think she intends—it is important that Parliament is informed of  them. Amendment No. 3 simply requires, as is the case in other legislation, that a copy of each such direction should be placed in the Library of the House.

Dawn Primarolo: The debate about the amendments goes to the heart of the issue; the balance to be struck in the new Department, and its relationship with Treasury Ministers. The Department needs to be accountable, through Ministers, to the House and its Select Committees, and to the Public Accounts Committee and the Treasury Select Committee through their Chairmen. It is not unique in that respect. However, some Departments have other functions, whereas this is its core function. In the interests of taxpayers' confidentiality, it has to protect information even from Ministers, and it has to administer the law—legislation passed by this House—without interference from those Ministers, or anybody else, to give favours. It also has to ensure that Ministers develop policy in a proper way, without favour. The balance of accountabilities, within the Department and between it and Parliament, is complex.
Revenue and Customs is, first and foremost, a Government department. The clause is essential in setting the limits of ministerial control, because of the important sets of obligations that the Department needs to discharge to the taxpayer, to the law and to the Minister in assisting in the development of policy. Ministers are accountable to Parliament for that Department. Therefore, they require powers—I hesitate to use the word, but I cannot think of an appropriate substitute—over the way in which commissioners exercise their functions. Without such control, HMRC would be autonomous and the important link of accountability to this House, which the hon. Member for Sevenoaks and others are keen to see remaining strong and vibrant, would be broken. While ministerial control is essential, right and proper, and it is important to ensure that Ministers' control is at arm's length so that they cannot intervene in the affairs of individual taxpayers. 
Some might argue that there is a bit of a blur between operation and policy. For example, tax credits is a policy, but the way in which it is delivered, which is operational, is none the less of great interest to the House and I, as Minister, was held to account for it. In those circumstances, I was most certainly under pressure—if I did not feel it already, which I did—from individual Members as well as from debates and the Select Committee. I was being encouraged to be involved in that area of operation. The definition of ''direction'' is somewhat difficult. Lots of things apart from the clause converge to comprise the Minister's responsibilities and duties. Those are separate from the accounting officer regulations and the civil service code on how the Department should perform. 
The clause seeks to set out the relationship between the Treasury and the commissioners, and deals with the exercise of their statutory functions as transferred to them under clause 4. Clause 10 carries forward the existing nature of the Treasury's oversight of the  predecessor commissioners' exercise of their statutory functions. It introduces a consistency of expression when dealing with Treasury power. The phrase 
''any directions of a general nature'' 
replaces different expressions of general Treasury control used in previous legislation covering Customs and Revenue, and applies to all the functions of the commissioners provided for under the Bill. Clause 10 will not change existing arrangements, and does not disturb other Treasury controls, such as those that apply to other Government Departments. 
The key issue is whether the Bill should limit the Treasury's power over the commissioners. Clause 10 recognises that a limit is required for one overpowering and overriding reason. It is a continuing commitment for the Government, and all hon. Members, to safeguard the collection and management of revenue and to keep taxpayers' confidentiality at arm's length from Ministers. Clause 10 limits the Treasury's power to requiring the commissioners to comply with 
''directions of a general nature'', 
thus preserving the situation in which the Treasury does not have the power to direct the commissioners' actions—as a Minister, I do not have such a power—over specific taxpayers. I understand what the hon. Member for Sevenoaks seeks, and it is crucial to reassure not only the House but all those who read our proceedings. They need to know that there is no way in which present or future Ministers could ever demand information of the department; it is not appropriate they should have it and, frankly, it would be totally wrong for them to have access to it. 
By removing limits to the Treasury's power over the commissioners' exercise of their statutory functions, amendment No. 2 would provide no safeguard on the level at which the Treasury might exercise direction. It would allow the Treasury, but not Ministers, to intervene in the affairs of individual taxpayers. I do not believe that that was the intention, but we simply cannot allow it. I am trying to explain why we used those words, and how we approached the problem. 
I turn to amendment No. 3. Again, because HMRC will be a Government Department, albeit a non-ministerial one, it will operate by and large along the same lines as all Departments. In that context, a direction should not be considered as a single decision or document. Rather, directions arise from the entirety of the relationship between the Treasury and the department. If a ministerial decision raised issues of propriety or regularity, it would be subject to the normal arrangements; the accounting officers would raise the issue directly with the Minister, request an instruction if necessary, and report that instruction to the Comptroller and Auditor General. In practice, however, HMRC proposals are often made to  Ministers on the basis of routine submissions, and Ministers will sometimes make proposals to HMRC. I smile at that, because Ministers sometimes pass on proposals from Members of Parliament about what the department should be doing. 
Clearly, on key issues there is likely to be a significant dialogue between Treasury Ministers, the commissioners and their offices. The outcome is a ministerial decision which may have the effect of a direction, even though, almost invariably, there will be an agreement on the way forward. Departments have always operated in that context. 
Is it necessary or helpful for all such decisions to be copied to the Libraries of both Houses? I have some difficulty in seeing why, when routine directions of Government Departments by other Ministers are not subject to such treatment. Why should this department be subject to it, when it has not impeded or undermined our democracy or the function of this House? 
That is not to say that these routine decisions will not be disclosed. Treasury Ministers are fully committed to meeting their requirements under the Freedom of Information Act 2000, just as they were to the previous code of practice, and will make information on ministerial decisions available, whether or not they take the form of a direction, in accordance with the Act. Therefore, I do not consider the hon. Gentleman's amendment, which would result in each and every one of these routine decisions by Ministers being lodged in the Libraries of both Houses, to be either necessary or helpful. 
Returning to the incident where the accounting officer considers that a ministerial decision is in conflict with the standards by which we expect Ministers to perform, the existing arrangements adequately cover the reporting of such occurrences to Parliament. For example, the Comptroller and Auditor General, to whom the accounting officer must report any such incident, will draw occurrences to the attention of the Public Accounts Committee, and include coverage in his report on HMRC's annual accounts. 
In summary, if the hon. Gentleman really feels he want to push amendment No. 2 to a vote—so that the qualification to Treasury authority over the commissioners' exercise of their statutory functions would be removed by the deletion of ''a general nature''—I will ask the Committee to reject it on the grounds that it removes all limits on Treasury powers over the commissioners. Those limits are important. 
If the hon. Gentleman wishes to push Opposition amendment No. 3, which would require a direction from the Treasury to be placed in the libraries of both Houses, to a vote, I would ask my hon. Friends to oppose it on the basis that the routine exercise of a general Treasury direction—sometimes informally, sometimes in the nature of a direction—does not need  to be lodged in the Libraries of both Houses. It is unnecessary duplication of the arrangements now in place under the Freedom of Information Act 2000. 
I hope that I have not only covered the hon. Gentleman's amendments, but given an indication of the complexity of the balance that it is important to strike in the department between the relationship of Ministers of the Treasury and the operations of the functions of the departments. I hope that, on reflection, the hon. Gentleman will decide not to pursue his amendments.

Michael Fallon: I am grateful to the Paymaster General. I think I made it clear that amendment No. 2 was a probing amendment. I can assure her and the Committee that I shall not seek to press it; partly because it was a probing amendment, but also because what she said was extremely helpful and has gone a long way to assuaging some of my concerns.
Having said that, I am bound to say that I found her response to amendment No. 3 far less encouraging and rather puzzling. She spoke about these directions possibly not being a single direction, or that there may be several directions, or a generic direction. At one stage she referred to them as proposals that might go from the Minister to the department. At another stage, she referred to them as decisions by Ministers. Finally, just before she wound up, she referred to them as informal or routine, almost announcements. That is not, of course, the power that has been taken under clause 10. The clause 10 duty is that the commissioners must comply with a direction of a general nature given to them by the Treasury. As it is now clear from the Paymaster General that these are only general directions, not involving the day-to-day operation of the Treasury, it is all the more important that we know exactly what they are. 
The Paymaster General has suggested that the directions will be revealed on application under the Freedom of Information Act 2000, but that is not satisfactory. When a direction is issued and the commissioners are forced to comply with it—such as a direction that the Revenue should take a slightly different approach to certain classes of company paying corporation tax, or that certain classes of individual, such as those non-resident for tax purposes, should be treated more leniently than others—it is extremely important that those people who follow such affairs, such as tax practitioners, know about it. Inviting people to make an application under the 2000 Act to find out whether such a direction might have been made is not helpful. 
The Paymaster General also said that if the decision—she kept using that word—was unusual, out of the ordinary or out of line, it would have to be disclosed through the accounting officer. That is perfectly true, but where the Treasury issues a general  and strategic direction, I do not see that it should be kept secret. She has not fully dealt with this case. A copy of a direction of a general nature should at least be placed in the Library. Before I decide what to do with the amendment, I invite her to address some of those concerns.

Dawn Primarolo: In the working relationship between a Minister and a department—any department, but particularly those under discussion—given the overriding importance of taxpayer confidentiality, there is not always an outcome every time a Minister speaks to officials. If there is, it does not have to be logged in the Library. I fail to see what the hon. Gentleman thinks Ministers may or may not be doing that requires disclosure to the Library. I remind him that the new department has its public service agreement targets. His own Committee calls Ministers regularly to account on the issues that it considers important, issues that this Committee is settling today by discussing clauses that it considers important and not pressing those on which there is general agreement. He knows that PSA targets are directions in the broadest sense. They are targets and they must be reported. I have been before his Committee to explain that when he has been in the Chair.
The hon. Member for Sevenoaks will know also that the new department will receive an annual remit from the Chancellor that will set its strategic direction. That will be published. The hon. Gentleman has the checks and balances; there is the annual report, the comments and the report of the Comptroller and Auditor General, all the accounting officer powers and the PSA targets, and there will be a published annual remit. Members of the House will be fully aware of the strategic direction. What they will not have—I cannot see the point in them having it—is the Minister's diary logged in the House of Commons Library, with the time of meetings with officials and the subject discussed. 
Unless the hon. Gentleman can be more specific about what he thinks is happening without his knowledge, but which he should know about, I continue to be of the view that the checks and balances are in place. Many of those did not exist before 1997. The general direction from Treasury Ministers to the departments was not then considered a problem. The Bill merely carries that state of affairs forward with the additional safeguards that the Government have established.

David Laws: I was hoping to save my comments on clause 10 until we reached amendment No. 79, but I was a little disappointed with the Paymaster General's response to amendment No. 3. The amendment seems to touch on the heart of the relationship between the Treasury and those parts of it that are, in theory, run  separately; the Paymaster General spoke of arm's length ministerial accountability.
The description that she gave us was of a Revenue department that would be able to run its own affairs from day to day without interference from the Minister, as part of a situation in which the Minister would clearly take an interest in strategic direction and in any major issues that might arise for discussion in Parliament. She would of course engage in continuing discussion and debate. She might be having meetings with the commissioners in the new department. She might have a block booking in her diary for discussion of relevant issues with them. 
The amendment is not an attempt to obtain from the Minister all sorts of information about her diary engagements and discussions with the commissioners. It is designed to get the Treasury specifically to put into the public domain those occasions when it gives the commissioners explicit directions—even if they are general in nature—to guide them in their activities. Surely the point is that, if the Paymaster General is correct in her description of the relationship between the Treasury and the commissioners, such directions will be quite few and relatively specific about what they relate to. If the relationship between the Treasury and the Revenue department is really as we have heard, surely it will be possible—and sensible, and in the public interest—for the directions to be put into the public domain. 
I am sure that the hon. Member for Sevenoaks is right to say that it is not realistic to think that freedom of information legislation will result in people constantly trawling for information in general to discover what directions the Paymaster General or the Treasury have given to a department such as the Revenue department about ongoing matters. The tax credit issue, which was mentioned earlier, is one on which we might well want the Minister to be very active. 
If we are really to understand clause 10 and what the relationship between the Treasury and the Revenue department will be in practice—something that we shall debate further on amendment No. 79—the Paymaster General should be willing to go further on amendment No. 3. The only reason for not accepting amendment No. 3 would be that the relationship between the Treasury, the departments and the commissioners was rather different from the one described by the Paymaster General, with more being dictated, and more attempts to micro-manage the departments. That would mean a ream of directions having to be put in the public domain. That might be uncomfortable and embarrassing for the Government, as it would appear that there was less of an arm's length relationship than the Paymaster General has suggested. It is a great pity that the Paymaster General  has not been willing to go any further in underlining her view of the right relationship between the Treasury and the new Revenue department by accepting the amendment.

Andrew Tyrie: I shall be brief. I agree with almost everything that the hon. Member for Yeovil and my hon. Friend the Member for Sevenoaks have said. Having listened to the argument, I am more concerned than I was before the sitting. I understood the clause to refer to directions that would need to be made only in the most exceptional circumstances. The relationship between a Revenue department and the Treasury involves constant dialogue. It does not involve someone sending out countersigned instructions with dates at the bottom by which everything must be complied with. At that point, the relationship between the Treasury and the Revenue department would clearly have broken down or would be close to breaking down, or an issue of great sensitivity would have led to a clash between the commissioners and Ministers that Ministers believed they needed to resolve by exercising this power. That is what I had assumed the clause to mean. When the Paymaster General defended her position, she seemed to be saying that the amendment would mean that she would have to put her diary and other miscellaneous details into the Library. As I understood it, that is not what it is about, and it worried me that she seemed to believe that it might be. The amendment relates to rare and exceptional circumstances.
We all know that Revenue powers are often one of the methods used in countries with less effective and less highly developed democratic checks to bring pressure to bear on institutions, businesses or individuals. We see that in an extreme form in Russia at the moment with respect to Yukos. Such an infringement of what people consider to be their rights in this area lies at the far end of the spectrum. It is of concern that the Paymaster General is not prepared at least to consider some means by which these rare instructions—I would be grateful for her confirmation that they are rare—could be put into the public domain. 
My hon. Friend the Member for Sevenoaks insisted on them being put into the Library, which seems to be a successful approach. By giving the Opposition that assurance, she will reassure us at a stroke that the clause does not mean what I took it to mean when we started debating it about 25 minutes ago.

Michael Fallon: The Paymaster General has rather disappointed me. We are not talking about diaries, informal working or any meetings that she may have with the chairman or others; we are talking about what the clause means. It refers to Treasury directions, so somewhere between the annual remit, which I fully accept is published with the PSA targets, and the day-to-day operational area, there is provision for  directions to be given. The clause imposes a duty on the commissioners to abide by those directions. If those directions are issued, I can see no reason why they should be secret. I beg to ask leave to withdraw the amendment, but I shall seek to press amendment No. 3 to a vote.
Amendment, by leave, withdrawn. 
Amendment proposed: No. 3 in clause 10, page 5, line 20, at end add 
''and a copy of any such direction shall be placed in the Library of each House.''—[Mr. Fallon.] 
Question put, That the amendment be made:—
The Committee divided: Ayes 3, Noes 9.

Question accordingly negatived. 
It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order. 
Adjourned till this day at half-past Two o'clock.